Personal income taxation in the human capital development incentive

The article substantiates the opportunities for stimulating the human capital development through personal income taxation in Ukraine. The need for constant investments in the human capital for improvement of its quality has been substantiated by conceptual provisions of the human capital theory and empiric researches of its influence on economic growth. The completed analysis of theoretical concepts and practical use of income taxes worldwide allows substantiating the fact that concept of a flat income taxation can be successfully used to promote the human capital development. However, the analysis of income tax systems abroad shows that separate taxation tools for personal income, including tax allowances for education, are more efficient. This is especially typical for developing countries. In estimating investments in the human capital in Ukraine, it is found out that the share of working population with high skills increases against the decreasing actual expenses for higher education. In a meantime, foreign countries demonstrate the other economically correct dependence: the qualification level increases as real expenses to gain it increase. The analysis of real national expenses in Ukraine for one student and in the country in general also demonstrate their decrease. This proves the presence of problems in Ukraine that relate to financing the system of higher education. The methods of economic and mathematical simulation by building and parametrizing a number of functions allowed to substantiate the influence of investments in human education on the increase of the highly skilled labor, which in turn leads to the GDP growth. A scientific and methodical approach has been developed, based on the algorithm that takes into account the influence of the highly skilled labor factor (considering expenses for gaining the qualification) on the GDP level. This approach allows estimating the effectiveness of expenses on tax allowances and expediency of their use to promote investments in higher education in Ukraine. The economic consequences of the human capital development incentive by introducing tax allowances in Ukraine have been estimated. It is established that if the state increases expenses for higher education by granting allowances, the share of working population with high skills increases, thereby causing the GDP to grow by means of increasing employment level. However, it has been found out that the expenses for tax allowances are reimbursed only in the case where investments in fixed assets increase and amount no less than 25 % of the GDP.